Analysis

Peter Taaffe, general secretary of the Socialist Party (CWI England &
Wales)

New technological innovations are having a huge impact on the capitalist
system, a subject explored in a new book, The Zero Marginal Cost Society.

The Zero Marginal Cost Society: the internet of things, the
collaborative commons and the eclipse of capitalism

By Jeremy Rifkin

Published by Palgrave Macmillan, 2014, £17.99

“The capitalist era is passing… [It] has peaked and begun its slow
decline… At the heart of capitalism there lies a contradiction in the
driving mechanism that has propelled it ever upwards to commanding
heights, but now is speeding it to its death…. Intense competition
forces the introduction of ever-leaner technology, boosting productivity
to the optimum point in which each additional unit introduced for sale
approaches ‘near zero’ marginal cost. In other words the cost of
actually producing each additional unit – if fixed costs are not counted
– becomes essentially zero, making the product nearly free. If that were
to happen, profit, the lifeblood of capitalism, would dry up”. (Chapter
1, The Zero Marginal Cost Society)

The central message of Jeremy Rifkin, in this important and fascinating
book, predicates the demise of capitalism brought about, among other
things, by the widespread use of technology, with the amount of human
labour contained in each commodity becoming smaller and smaller to
‘almost zero’. Here, Rifkin unconsciously vindicates Karl Marx – who he
approvingly quotes, frequently – on the idea that there is a long-term
tendency of the rate of profit to decline. However, there is also a
number of ‘counteracting tendencies’ which, Marx explains, can and do
delay the fall in the rate of profit, sometimes over a lengthy
historical period. Indeed, in the current crisis there is a surfeit of
profits – a cash mountain – that from the standpoint of the capitalists
can presently find no profitable outlet.

As a non-Marxist, the author does not approach phenomena – in this case,
technology – in an all-sided manner. One trend is emphasised: the
colossal effects of technological progress. But Rifkin envisages this
developing in a linear fashion. Yet capitalism has never given a
finished expression to the economic trends within it, carrying them
through to a conclusion. For instance, out of competition can develop
monopoly in the domestic market, only for the capitalists to face
intensified competition on the world market. Similarly, Rifkin tends to
underestimate the ability of capitalism to find a way out, temporarily,
from a seemingly hopeless economic situation.

It also bears repeating that there is no ‘final crisis’ of capitalism.
If the working class fails to seize favourable opportunities to change
society, then capitalism, on the bones of the working class – weakening
of the labour movement, increased poverty, unemployment, etc – can
establish a new unstable equilibrium. The slaughter of value through an
economic recession or slump, which to some extent is happening at the
present time, creates the conditions for a higher rate of profit, new
fields of investment and a new cycle of growth. But then there is the
resistance of the working class to a process which will add considerably
to the mass unemployment and penury.

Moreover, it would be wrong to underestimate the ability of the system
to innovate, to create new markets; witness the introduction of mobile
phones and the new markets this has created. Whether this will be enough
to compensate for the collapse in older industries and the job losses
which flow from this is another matter. Despite these qualifications,
and our disagreement with some of the conclusions drawn by Rifkin, this
is a valuable book which draws attention to the big dangers posed to the
working class and its historical achievements. At the same time, we can
draw positive conclusions about the future if new technology could be
harnessed for the benefit of the majority.

The rise of the robots

The processes described by Rifkin are already well known and are having
huge effects on employment prospects in those industries, music for
instance, in which the product can be accessed free through the
internet. Pop groups and other musicians, as well as the music industry
in general, are powerless to prevent this and the ‘compensation’ for
their labours now comes from spin-offs, such as gigs and memorabilia. In
current conditions, technology is already a ‘jobs killer’ on a
monumental scale. Economists like Robert Gordon in the US are predicting
that 47% of the jobs in the US, most of them the preserve of the middle
class, will disappear in the next few years through the application of
new technology.

The jobs of teachers and university lecturers are threatened by the mass
application of online teaching, as is the architectural profession, and
book production, through e-books, with knock-on effects on the book
trade, the income of authors, etc. The same goes for the medical
profession, with the application of highly sophisticated robots already
supplanting nurses and doctors, medical technicians, etc. Nor will this
process be restricted to the advanced industrial countries.

The US still leads in this field, with robot sales growing by 43% in
both the United States and the European Union in 2011. This, Rifkin
claims, has moved “the manufacturing sector ever closer to near workless
production, or what the industry calls ‘lights out’ production”. China,
however, as with most things in the ‘underdeveloped’ world, is also
pioneering the widespread application of industrial robots. Up to now
foreign capital in China has not invested heavily in robots because of
the ready supply of cheap labour. But wages have increased in the
coastal provinces, and this has compelled foreign capital to seek
cheaper and more profitable sources elsewhere: Cambodia, Laos, Thailand,
and untapped cheap labour supplies within China itself. Nonetheless,
robotics has also been embraced eagerly. Foxconn, the giant Chinese
manufacturer that produces iPhones, is planning to install a million
robots in the next few years which will eliminate a large portion of its
workforce. Foxconn chief, Terry Gou, was unable to hide his satisfaction
at this prospect: “As human beings are also animals, to manage one
million animals gives me a headache”. No strikes with robots!

Of course, threats to jobs through the application of automation are not
a new thing. Even firm capitalist economists – John Maynard Keynes for
instance – saw the application of new technology in the 1930s holding
out the prospect of reducing the working week to 19 hours. However, the
introduction of new technology during the great depression could only
add to the problems of capitalism at the time, further increasing the
army of unemployed that represented a constant threat to the capitalist
system. This was a factor in the technology which existed being held
back then and only fully applied during the second world war, but
particularly afterwards. This saw a massive boom in new industries, such
as rubber, plastics, etc, as a spiralling upswing of production took
place.

The situation today is more analogous with the 1930s than the colossal
boom of 1950-75. During the post-war period, particularly the 1950s and
1960s, capitalism was able to harness massively the advances in
technique and technology in the greatest boom the world had seen. We are
now, however, in an entirely changed situation, which Rifkin is aware of
and provides copious details set out in an impressive fashion.

Now, costs have tumbled and this will accelerate further. For the last
few decades, the fear of new technological developments, combined with
the outsourcing of jobs to places like China, has been a feature of the
discussion about whether there was any future for manufacturing in the
advanced industrial countries. Yet, while many industries and jobs
relocated to China, leading to significant deindustrialisation
throughout the ‘advanced’ capitalist world, the number of workers
employed in manufacturing has remained pretty steady taken from a global
point of view. That has now changed with the added threat to jobs posed
by mass robotics. And it is not just posed for large-scale industry.

Rogue landlords, the Independent reported recently, were proposing to
fly drones with cameras installed over the rooftops of properties in
order to assess whether repairs were needed, no doubt threatening the
jobs of roofers! Even the Financial Times has ruminated on the big
threat posed by robots, running stories to the effect that ‘we have to
get the robots before they get us’. Rifkin argues that, if the current
rate of technology displacement in the manufacturing sector continues –
and he expects this can only accelerate – factory employment, “which
accounted for 163 million jobs in 2003, is likely to be just a few
million by 2040, marking the end of mass factory labour in the world”.
To be replaced by what? The capitalists have no answer to this as they
have no solution to the current world economic crisis.

Limitless possibility

It was Karl Marx, together with Friedrich Engels, who first understood
and revealed the colossal revolutionising effect of capitalism through
the introduction of technology which, in turn, could lay the basis, for
the first time in history, for the abolition of ‘want’ throughout the
world. Limitless possibilities for humankind would flow from this. This,
of course, was on condition that socialist revolution would eliminate
the impediments to further progress: capitalist private ownership of
industry and society, on the one hand, with the nation state, on the
other.

Rifkin repeats Marx when he traces the process of capitalism, initially
developing a “competitive, free market”. Out of this develops the
tendency to eliminate competition through the establishment of a
monopoly or oligopoly. Once having established a dominant position, the
inclination of the capitalists to bring in new labour-saving
technologies, to advance productivity and reduce prices, is held back as
the monopolists attempt to keep prices artificially high. All of this
has been confirmed by the history of capitalism up to now.

Yet, as Rifkin points out, new, initially small, capitalist outfits can
establish a niche from which they can loosen, overhaul and then often
eliminate the former grip of the monopolists. However, this process,
repeated again and again, leads to the inevitable creation of new
monopolies. But these processes are not carried through to a conclusion
of complete monopoly. Monopoly can exist on a national level but can
then be undermined by economic rivals with a ‘greater share’ of the
world market. The same applies to the holding back of the use of
technology, as was the case in the 1930s.

Rifkin gives some very good examples of how monopolies are promoted even
by the apostles of the ‘free market’. For instance, former US treasury
secretary Lawrence Summers, together with economist J Bradford DeLong,
commenting on the emerging data processing and communication
technologies, opposed government intervention, in general, but favoured
short-term ‘natural monopolies’. They argued that “temporary monopoly
power and profits are the reward needed to spur private enterprise to
engage in such innovation”. Rifkin comments that in “an incredible
admission”, the two acknowledged that “the right way to think about this
complex set of issues is not clear, but it is clear that the competitive
paradigm cannot be fully appropriate… but we do not yet know what the
right replacement paradigm will be”.

Rifkin envisages a new “third industrial revolution”, which has
developed out of the second industrial revolution at the end of the 19th
and the beginning of the 20th centuries, and is already under way. The
discovery of energy resources, particularly oil, the invention of the
internal combustion engine, and the introduction of the telephone gave
rise to a new communication/energy complex that came to dominate the
20th century.

His new ‘third revolution’ is linked to the ‘internet of things’ which,
he envisages, “will connect everything with everyone in an integrated
global network. People, machines, natural resources, production lines,
logistic networks, consumption habits, recycling flows, and virtually
every other aspect of economic and social life will be linked via
sensors and software”. Robots and technology cannot replace people
completely. At present, they are “short of feeling”, which human beings
possess: “If your finger was as big as the Earth. It could feel the
difference between a car and a house”. (New York Times)

However, Rifkin’s economic case seems to have been bolstered,
particularly by the incredible development of 3D computers, which has
opened up “limitless possibilities”. 3D printing allows the possibility
for machines to reproduce themselves. It sounds like science fiction but
is a reality! This is a vital component of what the author calls “the
Third Industrial Revolution manufacturing model”. He claims this is
“growing exponentially along with the other components of the Internet
of Things infrastructure”. 3D printers are already producing products
from jewellery and aeroplane parts to human prostheses. They can print
their own spare parts without having to invest in expensive retooling
and the time delays that go with this. This development is rooted in
‘sustainable production’.

A fundamental failure of capitalism

This will indeed be a kind of revolution, but not one led by the working
class and its allies, argues Rifkin. Socialism is not his alternative
but something in between. Here, he betrays his roots as the son of a
small entrepreneurial businessman who always looked to increase
production and technique rather than speaking about ‘profit’. He sees
the inadequacies of big business but does not see the potential power of
the working class and the poor.

We are expected to believe that, through a protracted process, a long
drawn-out peaceful competition between a dying system, capitalism, and
what he and others describe as “the collaborative Commons”, the latter
will win out. This would be a hybrid system involving a burgeoning
collaboration, which is already taking place, between peoples,
cooperatives, small green enterprises, etc, and which seeks to embrace
the ‘best features’ of the ‘market’, capitalism. This will gradually
supplant capitalism. This perspective, as the author admits, does not
envisage going beyond Mahatma Gandhi’s swadeshi concept, described by
Gandhi as “mass production certainly, but not based on force… It is mass
production but mass production in people’s own homes”.

This is an unrealistic goal for replacing the ‘gigantism’ of capitalism
by turning back the wheel of history to a certain localism and petty
production. His schema apes the forms of production which predated
capitalism proper, in the modern sense of the term, relying on
small-scale scattered producers with goods collected by overseers or
capitalists and usually accompanied with intense overwork, sometimes of
whole families. Witness the situation in India today as small producers,
the small farmers, are unable to compete with an increasingly
monopolised economy. The result is mass suicides of farmers in protest
at being crushed by debt; worldwide there are 800,000 suicides each
year, undoubtedly reflecting the catastrophic social consequences of
capitalism.

Despite the utopian character of most of his alternatives, Rifkin
produces here a fascinating tour de force on the implications of
technology and the need to harness them in a peaceful and progressive
fashion for the benefit of humanity as a whole. In fact, the evidence is
so crushing against ‘modern’ capitalism’s incapacity to utilise its own
creations that this book, in all fairness, should be called ‘the
invading socialist revolution’ but for the fact that Rifkin rejects
socialism as an alternative. This phrase was used by Engels to describe
the process of ‘statisation’ in the late 19th century – the
nationalisation of individual industries – that indicated the failure of
capitalism and heralded the socialist future.

The ‘democratisation of everything’

Yet Rifkin unconsciously recognises the favourable conditions for
socialism, and some of the forces that can make this happen. Although he
does not state this, he is dissuaded from drawing this conclusion
because of the terrible heritage of Stalinism. But a repeat of a
top-down, bureaucratic-dominated society is not possible in the
highly-educated, culturally advanced society we have today, particularly
in the US.

Correctly, he states: “While the collaboratists [in reality, opponents
of capitalism] are ascendant, the capitalists are split”. He also
highlights favourably the anti-WTO movement in Seattle in 1999 that
prepared the way for the Occupy movement. This led, in turn, to the
election victory of Kshama Sawant, the first socialist councillor in
Seattle in 100 years. This new generation, whose political outlook was
taking shape even before the onset of the present devastating crisis,
their generosity of spirit and solidarity with the oppressed, has
obviously had a profound effect on Rifkin and others, and is reflected
in many of the observations he makes.

The idea of what he calls the ‘commons’ or the ‘collaboristas’ is partly
taken from history in the rights enjoyed by the masses in England, for
instance, in the transition between feudalism and capitalism, but which
were destroyed in this transition. He wishes to add to this with a
philosophy of sharing through the third industrial revolution, enabling
“consumers to become their own producers”. These new ‘prosumers’ will
increasingly collaborate in sharing goods and services in a globally
distributed networked ‘commons’ and near zero marginal costs, disrupting
the workings of capitalist markets. The unfolding economic clash between
these forces and the capitalists is “a manifestation of cultural
conflict that will likely redefine the nature of the human journey in
the years ahead. If there is an underlying theme to the emerging
cultural narrative, it is ‘the democratisation of everything’.”

However, how can this ‘democratisation of everything’ really be carried
out while capitalism, with colossal giant monopolies dominating with
their economies of scale, is left intact? Rifkin deals at length, for
instance, with the internet and ‘the internet of things’, at the same
time emphasising the approach of the new generation of scientists who
freely distribute and share their latest discoveries with fellow
scientists without first of all seeking financial rewards. This is in
marked contrast to Big Pharma which only invests and promotes products
if there is profit in it. There were no great gains to be made by
inventing an antidote to the Ebola virus because, initially, it mostly
affected poor people and nations. That is now changing as the current
epidemic threatens the advanced world.

Rifkin denounces inequality and highlights what even capitalist journals
have recently recognised: that where class divisions expressed by income
are starker than in other countries, there is greater resentment and
class opposition. In London, there are more so-called ‘ultrahigh net
worth individuals’ per head than anywhere else on the planet. They are
defined as people with £21 million or more in assets apart from their
main home. London has overtaken Hong Kong as the most expensive city in
the world, and this is against the background of falling incomes for the
great mass of British people, skyrocketing rents and mortgages, and
falling wages.

Rifkin also agrees with socialists that we can build a society – a
“sustainable cornucopia”, to use his phrase – not just of abundance but
of superabundance if all the resources of society were utilised for the
common good. However, he recognises the decline that has set in even
among the middle class: “The United States… [had] the most robust middle
class in the world in 1960… By 2012, the United States had the
ignominious distinction of being ranked 28 out of 30 in the OECD
countries in income disparity – the gap between the rich and poor –
bettering only Mexico and Turkey”.

System change

How to change this situation to the benefit of the vast majority of
working people and even the middle class? Rifkin’s solution is to change
society through argument and force of example – effectively, “behind the
backs of society”, as Marx commented in relation to the great socialist
utopians such as Robert Owen. This is shown when he addresses his final
remarks to those “ensconced in the heart of the capitalist system who
fear that an approaching society of nearly zero marginal cost will spell
their own ruin”.

He seeks to assuage them by pointing out that the average lifespan of a
Fortune 500 company is only around 30 years. This amounts to him seeking
to convince the fearful capitalists to calmly accept their own demise.
It will not work with the big capitalists. A past British Labour leader,
George Brown, was more realistic when he stated: “No privileged group
disappears from the scene of history without a struggle, usually without
any holds barred”.

The capitalists will not calmly accept their fate, making way for the
likes of Rifkin with what amounts to a ‘middle way’ between the
capitalists, on the one side, and the mobilised mass ranks of the
working class, on the other. However, it is possible and even likely
that there will be splits within the ruling class, with the more
intelligent and farsighted recognising the blind alley of their system
and looking towards a new system that can take society forward. This
particularly applies to the younger layers, university students freed
from parental control, who can embrace Marxism.

However, for this to be sustained, it requires not just a critique of
capitalism – which Rifkin has, in a way – but also setting out in a
clear way the alternative of socialism, and building the force to
achieve it: a mass party with a farsighted leadership. The capitalists’
power and wealth, their ownership of the means of production and the
control of society, will have to be taken away from them through a mass
movement. The idea that the opposition to the capitalists will be able
to utilise the internet indefinitely, with complete freedom to undermine
capitalism, is already contradicted by the encroachments which the
capitalists and states have made upon this ‘free resource’. Witness the
muzzle which has been placed on the internet in China, Turkey, etc.

There is much in this book which is useful, indeed admirable. It points
to the huge economic danger of new technology for the working class but
also for the capitalists. It threatens to provoke a mass revolt, the
outlines of which we can see in Scotland, Britain and throughout
southern Europe in what amounts to a mass uprising of the working class
and the consequences of a failing and diseased system. In this
situation, the new ‘Luddites’ are not the working class but capitalism –
whose historians distorted the views of the original Luddites. The
capitalist system cannot fully utilise the huge potential benefits
flowing from the latest developments in technique. Only a planned
economy leading to democratic socialism on a national and international
scale can do this and, in the process, satisfy the yearning of those,
like Jeremy Rifkin and the new generation, for real change.